Thursday, October 27, 2011

Corruption at FERC: Lawyer charges pipelines given freedom to profiteer

Thomson Reuters News & Insight columnist David Cay Johnston on Oct. 17 reported that a fourth of the nation’s oil pipelines last year earned excessive profits, at up to seven times the rates allowed by the Federal Energy Regulatory Commission (FERC).

The charge appears in an explosive analysis prepared by a former general counsel for FERC.

R. Gordon Gooch, the former counsel, alleges in his Oct. 3 study, that Sunoco’s Mid-Valley Pipeline, which carries crude oil from Texas to Michigan, earned a 55 percent return on assets. That is seven times its authorized profit margin, based on a calculation derived from an accounting report the company filed with FERC.

Three other regulated monopoly pipelines earned more than 40 percent on their assets, while another three earned more than 30 percent, an examination of their FERC filings by the Reuters news agency shows.

To put that level of profitability into context, overall nonfinancial businesses earned a 6.7 percent after-tax profit on their assets last year, the latest Bureau of Economic Affairs report shows.

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